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Greeks queue in front of the National Bank to use an ATM to withdraw cash in Athens, Greece.
Milos Bicanski / Getty Images

Greece no longer in default

Athens pays billions of euros to the IMF and the European Central Bank as it raises taxes

July 20, 20157:53AM ETUpdated July 21, 2015 1:13AM ET

The Greek government has raised taxes and repaid billions of euros to its creditors as its banks reopened just days after the country reached a deal with its European partners.

A source close to the Greek finance ministry told the AFP news agency that the government had completed payments that were due to the European Central Bank and International Monetary Fund on Monday, after the EU granted emergency bridge funding of 7.16bn euros ($7.75bn).

The IMF separately announced that Greece was no longer in default on its loans after remitting about two billion euros ($2.2 billion) to make up for missed repayments, while an ECB spokesperson said: "The ECB confirms it has been repaid."

In response to last week's parliamentary vote backing the austerity measures, the ECB raised the amount of liquidity assistance on offer to Greek banks, paving the way for them to reopen.

The European Union also sent a three-month loan to Athens, enabling the government to repay the ECB and IMF debts.

Non-payment of either loan would have derailed Greece's latest bailout request.Greeks woke up Monday morning to find banks reopened after three weeks of being shuttered to the public but new austerity taxes meant that most everything was more expensive — from coffee to taxis to cooking oil.

In downtown Athens, people queued up in an orderly fashion as the banks unlocked their doors at 8 a.m., but restrictions on most transactions remained. The daily cash withdrawal limit stayed at 60 euros ($65) but the government added a weekly limit of 420 euros ($455) that will be available beginning Sunday.

Many services were also hit by the new taxes: restaurants and cafes, funeral homes, taxis, ferries, cram schools and language schools.

After months of negotiations with creditors, Greece was forced to accept their demands to impose pension cuts and sales tax hikes.

Louka Katseli, head of the Greek Banking Association, said Monday it was too early to say how long the cash controls would last.

“I totally understand people who are anxious. But acting with fear produces the circumstances that people are afraid of,” she told state-run ERT television. “Since 2008, 124 billion euros in deposits has been withdrawn, and 40 billion of that money has been removed in the last few months. If that had not been removed, the Greek banks would not have had a liquidity problem.”

Greece's left-wing government is racing to finalize a new bailout agreement with creditors and faces another vote in parliament this Wednesday to impose more austerity measures.

Amid the pressure, Prime Minister Alexis Tsipras is struggling to contain a growing revolt in his Syriza party that threatened to topple the government last week in the first round of austerity voting. Cabinet-level dissenters were replaced in a reshuffle Friday, but even their replacements have angrily denounced the new austerity measures.

“The government was obliged to make a tactical retreat to save the country,” new Labor Minister Giorgos Katrougalos said Monday. “This was the result of a soft, post-modern financial coup that was handled by the prime minister in a responsible way.”

The spending cuts and new taxes are likely to add two more years to Greece's punishing six-year recession, and have triggered a new round of strikes and street protests.

The U-turn came after the country's previous bailout program expired, Athens defaulted on debts to the International Monetary Fund and Greek banks came to the brink of collapse as the European Central Bank refused to raise its daily emergency assistance.

The money is part of a third bailout for Greece over which negotiations are expected to last several weeks.